Coastal properties return to 2003 price levels

Coastal property prices have collapsed, sending the value of "the bach" back to 2003 levels in many areas, with no signs of a bottoming out.

The worst hit spots are weighed down by subdivisions developed in the boom-times where sections are now selling at huge discounts to original asking prices, and the impact of tumbling land prices has flowed through to holiday homes and standard residential properties.

The problem is at its most pronounced in areas such as the Far North, where the latest rating valuations have brought the first across-the-board cuts - up to 29 per cent for land value - since the Far North District Council was formed in 1989.

But the picture of sliding prices over the past three years, analysed in Property Report in Monday's Herald, is right across the upper North Island and demand has virtually dried up.

The quarterly liftout, which features QV data of house price movement in around 400 North Island areas, finds it's a buyer's market with no buyers. That's handing opportunities to bargain-hunters.

"The odd buyer who is there is looking for a bargain, and who can blame them," says one Whangamata agent. "That's the market talking, and if they don't get what they are looking for at their price they will move on to the next one."

The sliding land prices - with some mortgagee sales returning prices less than half of original "value" - are pulling down holiday home values, and real estate agents in all the popular coastal areas have a mountain of stock. It is no different at lakes and rivers. Some baches have sat for two or three years without an offer, and many others have been withdrawn after finding no interest.

People who bought "off the plans" at small, enticing deposits when the market was humming have either taken heavy losses or are sitting on assets which are seriously eroding their personal wealth.

Many are waiting for the holiday market to turn in hope of getting back their money. But it seems a forlorn hope, with predictions that values in some areas will take more than a decade to get back to 2006 levels.

A catch-up in real term price appreciation - where values move ahead of inflation - may never happen.

The paper loss may not be a major issue for long-term holders with no money worries who bought for the lifestyle rather than capital gain. And if the property has been held by the family for years, it's probably not a matter of losing money - more one of making less today than four or five years ago.

But for the thousands who bought towards the top and now want to quit, it's ugly.

One senior agent with an interest in coastal property says: "Generally speaking, coastal values are now back to where we were in 2003, just as the boom was getting into its stride, and perhaps half the value of the peaks of 2006-2007.

"This is a discretionary market and the banks are either not lending or being very tough. Added to that is a massive over-supply of land which is having a crushing effect on values, and that is not going to change any time soon."

A senior Bay of Plenty valuer agrees with that assessment and adds: "I can't see coastal, generally, increasing in value in the next three years. So in 2013 we will have had a decade of zero growth, which in real terms is a decline of perhaps 30 per cent. Yet some people still consider their beach property to be an investment."